Mixed response to asset sales deal

Economists are split over the commonwealth’s public asset sales deal with the states.

The Abbott government is using public money to bribe states into selling off assets and forgoing millions of dollars in potential dividends, an economist says.

All states have agreed to a federal government deal to sell public assets and direct profits into road and port projects.

The commonwealth will provide a funding pool for two years until June 30, 2016 providing an additional 15 per cent of the asset sale value back to the states.

But University of Queensland economics professor John Quiggin says the states have made a grave mistake.

“Asset sales haven’t yielded returns to states consistent with the earnings foregone,” he told AAP.

“The commonwealth is essentially using public money to bribe the states into pursuing its own political objectives.

“The federal government is ideologically in support of privatisation and it’s beneficial to the financial sector, and its interests weigh very heavily with the government.”

The commonwealth also wants to impose time limits on the states to sell up.

Professor Quiggin said the privatisation of the Commonwealth Bank in the early 1990s showed the folly of assets sales.

“The Commonwealth Bank public share holding was sold for something like $3 a share, and those shares are now worth more than $60 and they’ve been paying substantial dividends,” he said.

But AMP Capital Investors chief economist Shane Oliver disagreed, saying asset sales have a track record of stimulating the economy and driving down government debt.

“It’s also beneficial to investors because it gives Australians access to a broader range of assets to put their money into, particularly superannuation funds, which have been historically quite keen to invest in infrastructure,” he said.

The privatisation of Telstra led to a far more competitive and dynamic telco sector, Dr Oliver said.

“It also helped the federal government substantially pay down debt,” he said.

“I’d rather taxpayers money go towards social services, not for governments to run businesses. We have a private sector to do that.”

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